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February 13, 2021

Beat Your Non-Compete! Five Ways Out of a Non-Compete Agreement

Beat Your Non-Compete! Five Ways Out of a Non-Compete Agreement

You’d like to find a new job, but there’s a not-so-small hitch: You signed a non-compete agreement. It says you can’t work for another company in the same line of business in the same geographic area for six months, a year, maybe longer. Switching industries would mean a steep pay cut. Relocating to another part of the country would upend your life. Quitting and waiting out your non-compete simply isn’t an option. Are you stuck?

Make no mistake, a non-compete can derail your career. It can keep you locked in a position that frustrates you or fails to reward your contributions. And if you leave—or if you’re fired—your employer may use your non-compete to make life difficult for you.

The good news is that non-competes are often beatable—more often than many people realize. Michigan courts can and will enforce a non-compete. But an employer must first overcomer a number of hurdles. Here are five potential ways to beat your non-compete.

1. The Non-Compete is Too Broad

Many non-compete agreements are badly drafted. It’s shocking, really. Whether through greedy overreach or sheer carelessness, non-compete agreements commonly purport to impose restrictions far broader than what the law allows.

Courts scrutinize non-competes closely to make sure they are reasonable in territory and duration. For example, if an employer does all its business in one city or county, a non-compete purporting to cover the entire state likely will not be enforced as written. Regarding duration, while a six-month restriction may be enforced, a non-compete lasting ten years is not likely to be enforced absent extraordinary circumstances.

In Michigan, courts have power to cut an unreasonably broad agreement down to size. The difference between a “reasonable” agreement and an unreasonable one may be the difference between being accepting a great job offer and being forced to turn it down.

2. The Non-Compete Does Not Protect a Legitimate Business Interest

The point of a non-compete is to protect a company’s reasonable competitive business interests. For example, companies have long used non-compete agreements to keep valuable confidential information from getting into the hands of competitors. Other interests recognized as legitimate include customer relationships and goodwill. What a company may not do is use a non-compete to shield itself from lawful competition.

Your non-compete may include language stating that its purpose is to protect confidential information. But if the employer never gave you access to such information—or if the information it gave you is known to the public and thus not actually confidential—then the agreement may not protect a reasonable business interest. Similarly, if the non-compete claims to protect customer relationships, but you were not working in a customer-facing role, it may be that no legitimate interest is being protected

3. You Never Signed a Non-Compete

Yes, this happens. An employer may have a general policy of requiring its employees and officers to sign non-competes. But if it forgot to give one to you—or if it gave you a non-compete agreement but you never actually entered into it—you cannot be legally bound.

The lesson here is to keep a careful record of all employment documents, and when in doubt, ask your employer for your complete personnel file. If the employer cannot cough up a validly executed non-compete agreement, it has no business trying to restrict you.

4. Your Employer Screwed Up

A non-compete agreement is a contract between two parties, an employer and an employee. Both parties have a duty to hold up their end of the bargain. Generally speaking, if one party materially breaches a contract, the other party is off the hook and has no further obligations under the agreement. Employers sometimes forget this point.

Suppose your employer wrongfully withholds sales commissions, or fails to grant agreed upon compensation or benefits after you have met certain benchmarks. Or suppose your employer fires you in violation of a “for cause” termination provision of your employment agreement. Depending on the particulars of the situation, such actions could be a material breach that excuses you from your non-compete obligations.

Along the same lines, the “unclean hands” doctrine may be invoked where a party acted wrongfully in relation to the relief sought. If an employer’s bad faith actions are what drove you out of the company, it may be barred from obtaining injunctive relief against you.

5. Your New Position Does Not Actually Compete

Enforceable or not, your new position may not actually run afoul of your non-compete. Of course, your old employer will likely claim that you are competing if your new job has any conceivable relationship whatsoever to your old one. But suppose you have moved from a technical role to a sales role, or from a customer-facing role to a management role. Or suppose your new employer is part of the same broad industry but operates in a substantially different niche from your old one. Depending on the facts and the language of your agreement, you may not be competing in the relevant sense at all.

Takeaways

The one thing you should not do is pretend your non-compete does not exist. The results can be dire. Many have learned the hard way what it is like to be on the receiving end of a lawsuit and court order barring them from taking—or keeping—a new job position.

At the same time, an oppressive non-compete need not stop you from moving your career forward. Employers wave around non-competes—sometimes non-competes that are patently unenforceable—to push their employees around, believing they will knuckle under at the prospect of litigation. Don’t let bad faith tactics keep you in a bad situation.

What employers do not want you to know is that non-competes are harder to enforce than other types of contract. This is why sensible employers will often compromise rather than litigate. With some creative thinking and bold advocacy from a competent non-compete lawyer, you may will find a solution that works for both parties. And if not, depending on the circumstances, you may be able to beat your non-compete in court.

Maxwell Goss is a business and intellectual property litigator in Michigan. Max assists with clients with non-compete counseling and dispute resolution.

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    About the Author

    Maxwell Goss represents plaintiffs and defendants in all stages of federal and state court litigation and provides strategic advice on intellectual property and business law matters.